Washington must change the system that encourages high drug prices
“Take away our rebates? We’ll just up premiums.” This is the threat from pharmacy benefit managers (PBMs) and insurers if rebates are passed back to seniors in Medicare.
PBMs determine the formularies for Medicare beneficiaries, thus controlling what drugs they can get, where they can get them and how much they will pay for them. Ideally, placement on the preferred formulary should be based on efficacy, safety and lowest list price. However, preferred status is determined by highest price concessions from manufacturers in the form of rebates and administration fees.
For years, PBMs have disguised the billions of dollars in rebates and fees they pocket from manufacturers by describing them as “savings” to the health care system. These rebates are kickbacks to the PBM from the manufacturer for preferred placement on the formulary.